2.4 Flashcards
revenue
selling price x number of units sold
total variable costs
variable cost per unit x number of units sold
total costs
fixed costs + variable costs
profit
revenue - total costs
interest on loans (in %)
(total repayment - borrowed amount) / borrowed amount x 100
break even (units)
fixed costs / (selling price - variable cost per unit)
break even (revenue)
break even (units) x sales price
margin of safety
actual or budgeted sales (or output) - break even sales
net cash flow
total cash inflows (receipts) - cash outflows (total payments)
opening balance
closing balance of the previous period
closing balance
opening balance + net cash flow
lead time
delivery date - date stock re-ordered
gross profit
sales revenue - cost of sales
gross profit margin (%)
(gross profit / revenue) x 100
net profit
gross profit - other operating expenses and interest
net profit margin (%)
( net profit / revenue ) x 100
average rate of return (ARR) (%)
(average annual profit / cost of investment ) x 100
average annual profit
total profit / number of years
percentage change
(difference in figures / original figure ) x 100
average
total of all individual values / number of values in the set
Q: What is profit?
A: Profit is the reward for the risk entrepreneurs take in providing a product/service
What are the two main types of profit?
A: Gross profit and net profit.
Q: How is gross profit calculated?
A: Gross profit = Sales revenue - Cost of sales.
Q: How is net profit calculated?
A: Net profit = Gross profit - (Operating expenses + Interest).
Q: How do you calculate the Gross Profit Margin?
A: Gross Profit Margin = (Gross profit / Sales revenue) × 100%.
Q: What does the Gross Profit Margin indicate?
A: It shows the proportion of revenue left over after paying for costs of sales.
Q: How do you calculate the Net Profit Margin?
A: Net Profit Margin = (Net profit / Sales revenue) × 100%.
Q: What does the Net Profit Margin indicate?
A: It shows the proportion of revenue left over after paying all expenses.
Q: What is the Average Rate of Return (ARR)?
A: The ARR measures the profit from a proposed capital project
Q: How is the ARR calculated?
A: ARR = (Average annual profit / Cost of investment) × 100%.
Q: What does the ARR help determine?
A: It helps decide which project generates the most profit.
What is Sales Revenue?
A: Sales revenue is the financial value of units sold.
Q: How do you calculate Market Share?
A: Market Share = (Sales revenue of business / Total sales revenue in market) × 100%.
Q: How do you calculate the percentage contribution of a product to overall sales revenue?
A: Percentage contribution = (Sales revenue of product X / Total sales revenue of all products) × 100%.
What is quantitative data?
A: Quantitative data is statistical numeric data used for decision making
Q: What are the two sources of quantitative data?
A: Primary data (collected firsthand) and secondary data (collected by others).
Q: What are examples of quantitative data sources?
A: Graphs, charts, financial data, marketing data, tables, and infographics
Q: What is a bar chart?
A: A bar chart visually compares data, like monthly umbrella sales.
Q: What is a pie chart?
A: A pie chart shows proportions, such as the breakdown of umbrella sales by model.
Q: What is a scatter graph used for?
A: A scatter graph identifies relationships between two variables, like temperature and barbecue sales.
Q: What types of financial data do businesses use?
A: Sales revenue, profit, costs, tax, interest rates, asset valuations, and bank balances.
Q: What is Companies House used for?
A: Companies House collects key financial data from companies each year.
Q: How is marketing data collected?
A: Through surveys, focus groups, observation, customer feedback, footfall data, publications, and media.
Q: How can marketing data help businesses?
A: It aids in sales forecasting, product development, and promotional planning.
Q: What does market data include?
A: Demographics, market size, competitor market shares, growth rates, average prices, investment data, and commodity prices.
Q: How can market data benefit businesses?
A: It helps identify opportunities, plan for threats, and make investment decisions.
Q: What are some limitations of financial data?
A: It can be interpreted differently, becomes outdated quickly, and may ignore qualitative factors like social responsibility or ethics.
